In the Q1 earnings season, the Finance sector turned out to be one of the best performers. Particularly, benefits from a stabilizing economy and improving interest-rate scenario have well positioned the banking industry. Moreover, lower commercial tax rate are likely to further boost banks’ profitability.
In addition, relieving banks from some of the stringent requirements of the Dodd-Frank Act has made the companies optimistic of future earnings growth and raised investors’ sentiments as well. So, we thought of bringing up a stock from the sector that reflects strong fundamentals and solid long-term growth opportunities.
Particularly, Synovus Financial Corp. (SNV - Free Report) is one such stock that not only beat estimates this time, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 60 days, the Zacks Consensus Estimate for 2018 and 2019 jumped 5% and 6.5%, respectively.
Synovus can be a solid bet now on the back of its organic and inorganic growth strategies which have placed it well for the future. Moreover, the company’s focus on balance-sheet growth is encouraging.
Furthermore, shares of this Zacks Rank #1 (Strong Buy) company have gained 9.6% in the last six months, outperforming 7.3% growth recorded by the industry.
5 Reasons Why Synovus is an Attractive Buy
Revenue Growth: Organic growth remains a key catalyst for Synovus, with its net interest income witnessing at a Compound Annual Growth Rate (CAGR) of 7.7% over the past four years (2014–2017). Also, loans have increased at a CAGR of 5.5% for the last four years (2014–2017). In first-quarter 2018, the increasing trend continued for both loans and NII.
Additionally, the company’s projected sales growth (F1/F0) of 5.28% (compared with 3.17% growth for the industry) ensures continuation of uptrend in the top line.
Earnings Strength: Synovus has witnessed historical (3–5 years) earnings per share growth of 31.6% compared with 15% for the industry. In addition, the company’s estimated long-term EPS growth rate of 8.0% promises rewards for investors. Synovus also recorded an average positive earnings surprise of 4.85%, over the trailing four quarters.
Steady Capital Deployment: Synovus remains committed toward creating value for its shareholders through dividend hikes, share buybacks and acquisitions, thereby reflecting strong balance-sheet position. In October 2016, the company acquired Entaire Global Companies, Inc. In September 2017, the company also completed the purchase of Cabela's banking operation. Further, the board of directors has authorized a new share repurchase program of up to $150 million shares in 2018. Also, in March 2018, it announced a 67% hike in quarterly dividend.
Superior Return on Equity (ROE): Synovus’ ROE of 12.29%, as compared with the industry average of 8.78%, indicates the company’s commendable position over its peers.
Strong Leverage: Synovus’ debt/equity ratio is valued at 0.66 compared to the S&P 500 average of 0.68, reflecting lower debt burden relative to the industry. It highlights the financial stability of the company even in an unstable economic environment.
Other Stocks to Consider
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last seven days. Over the last six months, the company’s share price has been up more than 5%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock jumped more than 17% over the past six months. It currently carries a Zacks Rank of 2.
Northern Trust Corporation (NTRS - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 8.5% over the last six months. It holds a Zacks Rank #2, at present.
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